US Canada Mexico flags
WASHINGTON, D.C., U.S. — The fifth round of negotiations over updating the North American Free Trade Agreement (NAFTA) concluded Nov. 21 in Mexico City. The three nations’ chief negotiators sat this one out as no significant breakthroughs seemed likely, and none, in fact, occurred. Progress was noted on some non-contentious issues, but the United States remained at loggerheads with its NAFTA partners Mexico and Canada on key issues that the Trump administration asserted were key to a necessary “rebalancing” of the 23-year-old treaty.

U.S. Trade Representative Robert Lighthizer, in a statement issued after the conclusion of the round, said, “While we have made progress on some of our efforts to modernize NAFTA, I remain concerned about the lack of headway. Thus far, we have seen no evidence that Canada or Mexico are willing to seriously engage on provisions that will lead to a rebalanced agreement. Absent rebalancing, we will not reach a satisfactory result.

Robert Lighthizer USTR
U.S. Trade Representative Robert Lighthizer.

“A rebalanced, updated NAFTA will promote greater prosperity for American workers, farmers, ranchers and businesses and strengthen the North American region as a whole. Our teams will be meeting again next month in Washington. I hope our partners will come to the table in a serious way so we can see meaningful progress before the end of the year.”

Chrystia Freeland, Canadian foreign minister, gave a sharp response to Lighthizer’s assertion Canada and Mexico weren’t negotiating in good faith.

Chrystia Freeland Canadian foreign minister
Chrystia Freeland, Canadian foreign minister.

“We very strongly reject any suggestion that Canada is not approaching the negotiations with goodwill or in the spirit of compromise,” Freeland said. “A spirit of goodwill, though, does not necessitate accepting extreme proposals. One could say that it is the partner who puts extreme proposals on the table that is not negotiating with as much goodwill as one might like.”

Negotiators indicated they achieved some progress in agreeing to updated provisions on digital trade, telecommunications, customs procedures and health and safety standards for food.

But there was no agreement on key Trump administration proposals, including changes to provisions related to rules of origin of automobiles and trucks and a sunset clause that would see NAFTA expire if the parties don’t agree each five years to renew it.

The Trump administration has proposed raising to 85% from the current 62.5% the minimum amount of parts that must be made in one of the three partner countries in order for a vehicle to qualify for tariff-free treatment under NAFTA. Additionally, the Trump administration wants Canada and Mexico to agree that 50% of the content of an automobile must be from the United States.

Freeland said the proposal that half the content of an automobile be from the United States remained a non-starter.

“We are very clear about the national content idea. That is not something Canada can accept,” Freeland told the editorial board of The Toronto Star. “It is an unprecedented proposal.”

At the same time, Freeland indicated Canada may be willing to talk about the level of regional content required to take advantage of preferential tariff treatment under NAFTA.

“That is an area where we are talking and are prepared to talk,” Freeland told Star editors.

Also opposing the rules of origin proposals were North American automakers, each of which maintains operations in all three NAFTA countries in what have become highly integrated manufacturing networks.

Mary Barra, chairman and CEO of General Motors Co.; Sergio Marchionne, CEO of Fiat Chrysler; and Joseph Hinrichs, executive vice-president and president of global operations at Ford Motor Co.
Leaders of the “Big Three” U.S. automakers, including Mary Barra, chairman and CEO of General Motors Co.; Sergio Marchionne, CEO of Fiat Chrysler; and Joseph Hinrichs, executive vice-president and president of global operations at Ford Motor Co., met with Vice-President Mike Pence, Ambassador Lighthizer and Gary Cohn, director of the National Economic Council, in Washington, D.C., U.S., Sept. 27 to press their case for continuing NAFTA and not pursuing the changes to the rules of origins as proposed.

At the Mexico City talks, with regard to the proposed sunset clause, Mexico, supported, by Canada, suggested NAFTA be reviewed every five years but not automatically expire. Mexico also rejected the U.S. demand that would permit new seasonal restrictions on imports of Mexican produce, and Canada pushed back against the Trump administration’s efforts to eliminate certain supply management practices in the Canadian agriculture sector, primarily dairy.

The sixth round of negotiations was scheduled for Jan. 23-28, 2018, in Montreal. In the meantime, lower-level negotiators will continue their work in intersessional meetings in Washington, D.C., in December.